GENERATION FLUX'S SECRET WEAPON (6)
In
a world of rapid change and great uncertainty, the greatest
competitive advantage of all may be at your very core.
Having
a mission is a powerful
tool. Even so, living your mission can be enormously complex. Case in
point: the efforts of Indra Nooyi, CEO of PepsiCo, the
$66-billion-a-year global snack and beverages giant.
Nooyi
acknowledges that she straddles two eras. "Every aspect of
business as we know it is being disrupted because of technology,
geopolitics, the democratization of media, and so on. Some people see
this as an opportunity. Others are scared to death." She talks
about the pressure to "make money at all costs" and the
difficulty of balancing the long-term needs of PepsiCo with
the short-term expectations of its shareholders. "To run a
business responsibly, you have to run it for the duration of the
company," she says, "rather than the duration of the CEO."
Nooyi
operates PepsiCo under a mission statement she calls "Performance
with Purpose." This is not a sexy or emotional phrase; in fact,
it is so banal as to seem almost without meaning. But the strategy
that underlies it is not entirely dissimilar from what CEO Ells is
executing at Chipotle. Nooyi's brand was built selling sugar water
and salty snacks, yet she has a customer base that is increasingly
health conscious. So how does she integrate those realities and still
satisfy return-hungry investors?
"When
we articulated this notion of performance with purpose, people said,
'Oh, this is corporate social responsibility,'" Nooyi says.
"Wrong. This is not about how we spend the money we make. The
focus needs to be on how we make the money." Her
mission-oriented strategy has three pillars. First, she explains, "we
had to transform the portfolio to include healthier products."
Second, she aimed to reduce the use of plastic, fuel, and water. This
was not just an environmental initiative, she says: "Our
sustainability agenda helps communities, but it is also linked to
financial performance." The third pillar is about people--in her
case, a whopping 270,000 employees: "How do we create an
environment in PepsiCo where everybody can bring their whole selves
to work? That helps recruiting and retention."
Do
these policies come from the heart, as Takeuchi would say, or are
they calculated? The answer is: both. Many people have questioned the
authenticity of Nooyi's mission; would a company with a truly
significant social agenda introduce a Mountain Dew fruit-juice combo
as a breakfast drink, as PepsiCo did last year in an effort to get
more young people to consume its caffeinated elixirs? It's hard not
to wonder how much the "performance" dictates Nooyi's
"purpose." PepsiCo's stock lagged behind that of rival
Coca-Cola for several years, but it has delivered nearly double the
return over the past 24 months. Depending on the analyst you speak
to, that's either because Nooyi's "performance with purpose"
is starting to pay off--or because the company has been backing away
from it. The jury is still out.
Even
Chipotle's food-with-integrity ideal can come into conflict with its
near-term financial goals. Here's one example: Sometimes Chipotle
cannot source enough sustainably raised meat to satisfy the heavy
demand for its burritos. Militant food-with-integrity advocates might
argue that Chipotle should pull unavailable items from its menu. But
that's not the choice Ells has made. In what Chipotle calls
"blackout" situations, affected stores put up signs
announcing that traditionally sourced meat has been substituted for
the sustainable fare customers are accustomed to. By and large, Ells
reports, customers continue to order the items they want.
Does
this decision make Ells a hypocrite, a leader who sacrifices his
mission to maximize financial rewards? (Ells himself has profited so
handsomely from Chipotle's success--he received $25 million in
compensation last year--that shareholders actually rebuffed the
company's executive-pay plan at this year's annual meeting.) Ells, of
course, says no. The more successful Chipotle becomes, he argues, the
more resources it has to encourage farmers to adhere to its standards
and increase the integrity of the food
supply.
Turning away customers could impede that larger goal.
Situations
like Chipotle's are complicated--as is so much of business. For
investors and for employees, it comes down to a question of trust:
Has the enterprise demonstrated in its actions and decisions a
long-term and genuine commitment to its stated mission? Is there real
progress that inspires engagement? Is the connection between what
makes it a great business and what makes it a compelling mission
authentic?
Chipotle
has such a strong record that Ells has earned the benefit of the
doubt. At PepsiCo, the burden is higher. Nooyi's predecessors never
intended for PepsiCo to have "performance with purpose" at
its core; that's why her stated task to imbue PepsiCo with mission is
monstrously challenging and far from complete.
BY
ROBERT
SAFIAN
No comments:
Post a Comment